Terms Of Reference For ATOL Review

Date: 17 November 2005

The Government and the Civil Aviation Authority (CAA) have today announced agreed Terms of Reference for a review of ATOL bonding. The review focuses on reducing the cost of the current bonding arrangements and the CAA will commence work immediately.

On 10 October the Government announced that it had decided not to implement the CAA’s recommendation to extend the scope of the current ATOL financial protection scheme to all air travellers departing the UK. However, the Government asked the CAA to review whether the current bonding system for ATOL holders might be replaced with a less burdensome way of meeting the tour operators’ customer refund and repatriation obligations.

Richard Jackson, Director of the Consumer Protection Group at the CAA, said: “We have been asked to look at reforming the ATOL bonding system and replacing it with a fund based on a customer levy. This is a major exercise and not straightforward, but our aim is to find a solution that brings real de-regulatory benefits to licence holders, while maintaining consumer financial protection.”

The CAA will consult licence holders and other key stakeholders on its proposals and aims to identify a solution within six months.


TERMS OF REFERENCE


Objective

To assess the options for reforming ATOL bonding within the constraints of the existing legislative framework and make recommendations on the way forward to Government.

Scope of review

To focus on reforming the bonding system (rather than wider aspects of ATOL licensing) with a particular emphasis on reducing the costs to ATOL holders that arise from the current bonding arrangements.

To consider moving from bonds to a single per-customer transparent levy to build up a fund, encompassing the Air Travel Trust Fund, for meeting ATOL holders’ refund and repatriation obligations.

Components

The principal areas to consider are:

· an enforceable collection mechanism;
· the size of the fund and the period of build-up;
· transitional arrangements;
· whether in the absence of bonding, changes to CAA’s financial monitoring of the industry are required.

Timing and consultation

The review should aim to identify a solution as soon as possible, and in any event within 6 months, and subject to that proceed swiftly to implementation. The CAA will need to consult the industry during this period.


For further information contact the CAA Press Office on: 0207 453 6030.


Notes to Editors

ATOL (short for Air Travel Organisers’ Licensing) is managed by the CAA and provides comprehensive protection from losing money or being stranded abroad to 28 million people in the UK who buy air package holidays and flights from tour operators each year. It is by far the largest travel protection scheme in the UK, and the only one for flights and air holidays sold by tour operators.

European legislation on package travel requires travel organisers to provide refunds and consumer repatriation in the event of insolvency and in the UK this requirement for air tour operators is met by the ATOL scheme.

All tour operators selling flights and air holidays must hold a licence from the CAA. Before an operator gets a licence it is examined to ensure it is properly managed and financially sound. In addition, it must lodge a bond, which is a financial guarantee provided by a bank or insurance company. If the ATOL holder fails, the CAA uses the bond money to pay for customers abroad to continue their holidays and to travel home as planned and also to make refunds to customers who have paid, but not travelled. If the bond is insufficient, the shortfall is met by the Air Travel Trust Fund, which is managed by the CAA.

The CAA published its advice to the Government on 22 September 2005, proposing to extend financial protection to all UK originating international air travellers. The CAA’s advice is available at www.atol.org.uk